China Stakes Claim to Texas Oil, Gas

The Houston Chroniclereports that state-owned Chinese energy giant CNOOC is $2.2 billion stake in 600,000 acres of South Texas oil and gas fields owned by Chesapeake Energy, potentially testing the political waters for further expansion into U.S. energy reserves.

As part of the deal, the largest purchase of an interest in U.S. energy assets by a Chinese company, CNOOC has agreed to pay about $1.1 billion for a chunk of Chesapeake’s assets in the Eagle Ford, a broad oil and gas formation that runs largely from southwest of San Antonio to the Mexican border.

CNOOC also will provide up to $1.1 billion more to cover drilling costs.

Juli MacDonald-Wimbush, a partner with Marstel-Day, an energy and environmental security consulting company in Fredericksburg, Virginia, told the paper that "amid low natural gas prices and a largely difficult drilling climate...highly liquid Chinese companies will find willing partners among onshore oil and gas companies hurting for capital to drill."

“It’s really kind of exploded. All of a sudden, you’ve started to see a lot of large-scale purchases,” said Evan Ellis, an expert on China’s involvement in the region who teaches at the Center for Hemispheric Defense Studies in Washington. “Basically Latin America is becoming a Pacific-oriented region.”

China invested $20 billion into Brazil’s offshore oil exploration and production, and loaned $20 billion to Venezuela to develop oil fields in its Orinoco River basin.

There happens to be another market right at our back door that China has been investing in, which an ancient US policy has prevented American companies from tapping.

Cuba.

We touched on this a while back, when we pointed out that Exxon Mobil, Chevron, ConocoPhillips, and Valero are buying tremendous amounts of oil from “dangerous or unstable” states including Syria, Saudi Arabia, Nigeria, Mauritania, Iraq, Congo, Chad, Algeria, and Libya -- whose National Oil Corporation warned US oil concerns last March of "repercussions" because of a negative reaction by State Department spokesman Philip Crowley in response to a statement by Muammar el-Qaddafi calling for jihad against Switzerland.

Cuba believes there may be more than 20 billion barrels of oil in the Cuban-controlled area of the Gulf of Mexico. That’s double its previous estimate (and, granted, considerably higher than the US Geological Survey’s numbers), but if it’s true, that number is more than four times the amount estimated to lie beneath Alaska’s Arctic National Wildlife Refuge.

“This is not the 1960s, when the Kennedy administration was protecting the US from a possible missile attack,” said Charles Drevna, executive vice president of the National Petrochemical and Refiners Association. "These resources will be developed and produced. Prohibiting US companies from developing [Cuban] resources…is an Alice in Wonderland approach to policy that must be revisited.”

Kirby Jones, president of Alamar Associates -- a firm that advises US companies interested in pursuing business opportunities with Cuba when the antiquated embargo is ultimately lifted -- has worked with companies both in the oil industry and otherwise, including Abbott Labs, General Electric, and Caterpillar, to name but a few.

“Maintaining the embargo means that we lose something of strategic importance to us -- oil,” Jones told Minyanville. “It’s one thing to let people export tractors to Cuba. It’s quite another to decide you don’t want oil sitting mere miles off the US coast that Russia, Canada, and Brazil are taking right now. The Cubans have said they welcome the involvement of US companies. The opportunity is there.”

“If you throw a mid-90 mph fastball, we will break laws to get you here, as in the case of Cuban pitcher Aroldis Chapman, who just signed with the Cincinnati Reds,” he said. “But I'll be damned if we fuel our planes, cars, and heavy machinery with Cuban oil? It makes no sense at all.”

Finally, what to make of Cuba’s human rights record when considering a normalization of trade with Cuba?

Daniel Griswold of the Cato Institute said, “In sheer numbers, the Chinese government has jailed and killed far more political and religious dissenters than has the Cuban government. And China is arguably more of a national security concern today than Castro’s pathetic little workers’ paradise.”

Of course, the "pathetic little workers' paradise" recently realized that having the majority of the population working for the state didn't translate into "paradise" and is now moving toward a freer market economy.

The question still remains, into whose hands should we be putting our dollars in exchange for oil? Ones that are enriching uranium and calling for the destruction of Western democracies? Or ones that are running a “pathetic little workers’ paradise” that poses no danger whatsoever to our national security?